All enterprises in the manufacturing of intelligent speakers have great expectations for intelligent audio. They hope it will become the “core” that links all smart homes, and a new entry point for paid services. But six years later, it’s still playing music/checking the weather/setting the alarm clock…
In 2014, Amazon’s Echo smart speaker came out and quickly became a global success.
Echo’s sudden explosion has flooded the smart speaker space with competitors like tech giants Google and Apple.
But nearly a decade later, there are few second winners in the smart speaker space besides Amazon. Apple discontinued HomePod in March 2021, and most smart speakers are still used to play music, check the weather, set an alarm clock, and draw curtains. And smart audio is now exposed to more and more problems. According to multiple REPORTS in the UK, a 29-year-old mother who was using Alexa urged the user to commit suicide.
The intelligence of smart speakers grows slowly. Is it the biggest false proposition of the AI era?
Why did Amazon make the Echo?
Before we talk about whether the smart speaker is a false proposition in the AGE of AI, let’s think about what Amazon is doing right as “the only winner so far” in the smart speaker space.
Amazon’s Echo is the world’s most shipped smart speaker, with a 20% market share, according to Strategy Analytics. The sweetener for Amazon goes far beyond simply selling speakers.
At first, the market looked at the Echo boom, but often overlooked the fact that Amazon didn’t expect to make money selling Echo speakers in the first place. Amazon regards Echo as a window into users’ lives in a deeper way. With the help of intelligent voice assistant Alexa, Amazon further stimulates the potential of e-commerce business and uses data to promote the upgrade of cloud services and AI algorithms of the company.
Amazon has done two big things with the Echo.
One is that the more AI interacts with humans, the smarter it becomes. Through hundreds of millions of voice interactions, Alexa, the intelligent voice assistant, has been upgraded and iterated in the exercise of big data, becoming the most “intelligent” intelligent assistant on the market, and this first-mover advantage has formed a snowball effect, leading more and more in the future competition.
Second, Echo’s role as a direct-to-user terminal has boosted Amazon’s e-commerce sales. Even Amazon is pleasantly surprised that, unlike the purchase experience of smart phones or computers, most users of smart speakers have the mentality of buying daily necessities, making them less selective in the purchase process and placing orders more decisively, making the purchase conversion rate higher than other terminals.
The Echo is connected to a smartphone shopping list to make online purchases
So amazon doesn’t care about how much money it makes directly with Echo. It’s more about how many users it reaches and how much value it creates indirectly.
To put this in perspective, RBC Capital Markets analysts have estimated that Echo will generate more than $10 billion in revenue for Amazon in 2020, of which about $5 billion will come from direct sales of Echo smart speakers, and more than half will be indirect revenue from voice sales.
With amazon’s further development and improvement in streaming media (such as paid movies and music) in the past two years, Echo, as a “lever”, will be able to leverage greater value.
To take a more concrete example, a consumer might pay $100 for an Echo speaker and then pay $20 a month for Amazon Music. Think $20 a month is too much? You can also buy Amazon Prime and a “package deal” on music, which adds up to about $25 a month.
Echo is part of amazon’s entire business ecosystem, and an Echo speaker can lead to a music membership and a shopping membership. From leisure and entertainment to online shopping, Echo speakers can leverage a huge consumption space as an entrance.
Amazon is no stranger to this kind of “gameplay”. The Echo is not unlike the Kindle device that took the world by storm and took off with Amazon and the e-book industry as a whole.
Isn’t such a large and perfect closed loop the “ecology” that tech giants are dreaming of? The closed loop of large-scale “online service + offline equipment” has created a unique Amazon empire.